The current situation of the company
The company announced that Weir, a subsidiary of Germany, will subscribe for additional shares issued by Tawana of Australia, with a transaction value of A $2000 and will hold about 11.45% after subscription. Tawana, which is mainly engaged in lithium exploration and development, has a 50% interest in the Balder Mountain project in Australia.
Comment
Take a stake in Tawana to ensure the supply of spodumene and share the investment income. The company's joint venture with Baowei Materials to produce spodumene concentrate for lithium carbonate and lithium hydroxide comes from the Balder Mountain project in Australia, which is 50 per cent owned by AMAL and Tawana respectively. On October 4, the joint venture party Baowei Materials has subscribed for the additional shares of AMAL, with a stake of 13.47%. The company invested in Tawana through its subsidiary Weir of Germany, enabling both sides of the joint venture to achieve synergy of interests with spodumene suppliers, which will help to ensure the timely supply of spodumene concentrate after the completion of the new production line in 2018, ensure the release of production capacity and contribute to performance.
At the same time, the lucrative Balder Mountain project will also bring a stable investment return for the company in the future.
The new production line has been successfully put into production, and the production capacity will begin to climb gradually. The company's new production line has been in mass production for nearly a month and has been raised to about 70 per cent of its design capacity, after which it will gradually climb to reach a capacity of 5000 tons of lithium carbonate. The success of this technological transformation has also laid a successful foundation for the company's upcoming increase of 10,000 tons of lithium carbonate production capacity in the future. The success of technological transformation will also greatly improve the company's performance, and the production cost of lithium carbonate is expected to drop from 90,000 yuan to 70,000 yuan per ton. If the company's lithium mica mining can be matched, the cost is expected to further reduce. At the same time, the company is actively promoting the expansion of lithium carbonate production line. According to the company plan, the lithium carbonate production capacity of 1H18 company lithium mica is expected to reach 15000 tons. In addition, the company cooperates with Baowei Materials to use spodumene to produce lithium carbonate, which is expected to form a production capacity of 10,000 tons of lithium carbonate and 5000 tons of lithium hydroxide in 2018. After reaching full production, the company's lithium carbonate + lithium hydroxide production capacity will reach about 30,000 tons, the performance flexibility is very large.
Large orders in Kowloon are expected to boost growth throughout the year. 1H17 was affected by the policy adjustment, and the revenue of new energy vehicles fell 78.4% to 111 million yuan compared with the same period last year. However, recently, the company has signed two large orders for Yinlong and national transport capacity, totaling 4 billion yuan, which will be completed by the end of 2018. The bus and logistics vehicle market has picked up since June, and growth accelerated in September. Kowloon is expected to fulfill its performance commitment of 221 million yuan remaining in 2017, and is expected to achieve high performance growth in 2018.
Valuation proposal
We keep our profit forecast unchanged. Maintain the target price of 18.34 yuan and maintain the recommendation.
Risk
The production and sales of new energy vehicles are lower than expected; the expansion of lithium carbonate production has slowed down.